Cablevision Q2 Net Income Dips 8 Percent

Concurrent with its Q2 earnings, Cablevision announced that its board of directors has signed off on a plan to spin off its Madison Square Garden business, which includes the eponymous arena, the New York Knicks and Rangers sports franchises and the MSG and Fuse cable networks.

By way of announcing the move, Cablevision president and CEO James Dolan said the spin-off will “create two distinct companies, each with enhanced strategic flexibility, its own defined business focus and clear investment characteristics.” Dolan added that the company believes that the combined value of the assets “has not been fully realized, and that the transaction will be beneficial to shareholders as both Cablevision and MSG freely pursue their own individual business plans.”

Dolan will serve as the executive chairman of the standalone MSG, which is expected to be separated from Cablevision by the end of the year, pending approval from the Internal Revenue Service and the Securities and Exchange Commission. He will also retain his role as the head of Cablevision.

Under the terms of the proposal, the transaction is likely to take the form of a pro rata distribution of shares, with holders of Cablevision shares receiving shares in MSG. Cablevision stressed that it is not considering the sale of MSG or any other business at this time.

Cablevision on Thursday announced its second quarter earnings, posting net income of $87 million, or 29 cents a share, down 8.1 percent from $94.7 million, or 32 cents a share, in the prior-year period.

Cablevision’s programming unit, which includes the cable networks AMC, IFC, WE tv and Sundance Channel, increased revenue by 5.3 percent, to $252.3 million. Despite a moribund advertising market, the Rainbow Media group saw its ad sales revenue increase by 2.3 percent versus the prior-year period, thanks in large part to higher pricing at WE tv. Affiliate revenue grew 9.9 percent during the quarter.

Thus far in this earnings season, ad sales results have been a mixed bag. Viacom saw its Q2 ad sales dollars recede by 6 percent, while the Turner networks were up 5 percent versus the year-ago period.

In the Q&A portion of the company’s earnings call, Cablevision chief operating officer Tom Rutledge said that while local ad revenue was down 16 percent, on a sequential basis, ad dollars were up 34 percent versus the first three months of the year, as automotive spend began to pick up.

Rutledge also noted that the cable operator was looking into offering more interactive advertising opportunities. “We’ve introduced the ability to take a viewer watching an ad and move that viewer to a Web-like service on their TV, where they can [get more information about] a product and place an order,” Rutledge said. “In the latter half of the year we’ll have more interactive advertising.”

On the MSO side of the ledger, Cablevision now boasts 2.9 million digital-video subscribers, which account for 94 percent of its overall sub base. The operator now serves 65 percent of homes passed.

The operator’s net revenues grew 4.6 percent to $1.3 billion.

Concurrent with its Q2 earnings, Cablevision announced that its board of directors has signed off on a plan to spin off its Madison Square Garden business, which includes the eponymous arena, the New York Knicks and Rangers sports franchises and the MSG and Fuse cable networks.

By way of announcing the move, Cablevision president and CEO James Dolan said the spin-off will “create two distinct companies, each with enhanced strategic flexibility, its own defined business focus and clear investment characteristics.” Dolan added that the company believes that the combined value of the assets “has not been fully realized, and that the transaction will be beneficial to shareholders as both Cablevision and MSG freely pursue their own individual business plans.”

Dolan will serve as the executive chairman of the standalone MSG, which is expected to be separated from Cablevision by the end of the year, pending approval from the Internal Revenue Service and the Securities and Exchange Commission. He will also retain his role as the head of Cablevision.

Under the terms of the proposal, the transaction is likely to take the form of a pro rata distribution of shares, with holders of Cablevision shares receiving shares in MSG. Cablevision stressed that it is not considering the sale of MSG or any other business at this time.